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WWW: Broker Barred for Churning Elderly Customer Accounts
[Photo: by DullHunk (Duncan Hull) / Flickr]
Kelly Althar, of San Pablo, CA, agreed to be barred from the industry to settle FINRA charges that he made unsuitable recommendations and engaged in excessive trading in accounts held by an elderly customer.
BACKGROUND. Althar entered the securities industry in January 1996. In 2011, he became registered with Financial West Group (FWG), during which time he engaged in the violative activities. Althar voluntarily terminated his FINRA registrations on 5/27/16,
FINRA FINDINGS & CONCLUSIONS. Althar engaged in high-volume trading to generate commissions and, in doing so, creatied undue concentrations in a customer’s accounts with risky securities. The transactions were unsuitable for this customer who was close to retirement and only wanted low-risk investments. Althar’s trading decimated the customer’s accounts, which constituted the bulk of her net worth and retirement.
Here are the details:
- An elderly customer, 68, was referred to Althar in early 2011 and opened an IRA account. She funded the account by transferring some $161,000 worth of growth- and income-oriented mutual funds from another brokerage firm. That, along with $100,000 of equity in her primary residence, constituted the bulk of her total net worth.
- In late 2011, the customer received an inheritance of cash and blue-chip securities worth about $147,000, which she deposited into a new personal brokerage account with Althar.
- From the outset, Althar exercised de facto control over both her accounts and frequently placed trades without consulting with her first. From the time the accounts were opened until March 2014, Althar executed a total of 246 trades in the 2 accounts - generating commissions of ~$139,000.
- Althar sold the blue-chip securities that were inherited, and he often purchased, sold and subsequently repurchased the same security in the customer’s accounts within a short period of time.
FINANCIALISH COMMENTS. We thought that others would be implicated in this affair - perhaps the firm or its Chief Compliance Officer would be cited for failing to supervise this errant broker. And so Financialish perused the FINRA BrokerCheck for Financial West Group and its COO, Corey White. Here's what we found - and didn't find:
FWG, currently headquartered in Westlake Village, CA, has been in business since 1985. The firm has 27 disclosures, including 20 Regulatory Sanctions and 7 Arbitration judgments. But it would appear that none of these disclosures seem to be relevant to this case. Corey White, who's been FWG's CCO since November 2012, has a clean CRD - no disclosures on his registration.
Surprised? Yes, and frankly disappointed. Or perhaps we're missing something. In either case, the FINRA disclosure process is inadequate.
This case was reported in FINRA Disciplinary Actions for April 2017.
For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2014041137501.